2018 (4) TMI 185 - AT - Income Tax

Application for the grant of registration made by the assessee u/s 12AA and approval u/s 80G(5)(vi) rejected - Held that - The undisputed fact is that the objects of the trust have not been doubted by the learned CIT(Ex). The allegation of the CIT(Ex) is that the trust has not started any activity and therefore it was not possible for him to satisfy about the objects and genuineness of activities before granting the registration in pursuance to the provisions of section 12AA of the Act. The law is now well settled that if the activities of the trust are at the commencement stage then the Ld CIT(Ex) cannot refuse the registration u/s 12AA of the Act without finding out any defect in the objects of the trust. The powers of CIT(Ex) are limited to the aspect of examining whether the objects of trust are charitable in nature or not. It should be kept in mind that at the stage of commencement of institution/ assessee Trust, it is not relevant to decide whether the Trust has actually carried out the charitable activities because in this case it is at the infant stage only i.e. within 6 months of its incorporation the relevant applications were moved by the appellant. In view of above, we are inclined to direct the Ld. CIT(E) to consider the applications for registration u/s 12AA of the Act and u/s 80G of the Act afresh - Decided in favour of assessee.

Summary

Issues:
- Rejection of registration under section 12AA of the Income Tax Act, 1961.
- Rejection of approval under section 80G(5)(vi) of the Income Tax Act, 1961.

Analysis:
1. The appeals were filed against the orders of the Commissioner of Income Tax (Exemptions) rejecting the registration under section 12AA and approval under section 80G(5)(vi) of the Income Tax Act, 1961.
2. The grounds raised by the assessee highlighted the arbitrary nature of the orders and the failure to recognize charitable activities by the new trust.
3. The Trust applied for registration and approval on 31.03.2017 but faced rejection on 14.09.2017 due to lack of activities, leading to doubts about the trust's objects and genuineness.
4. The rejection was based on the trust not starting activities, as required for registration under section 12AA, and this decision was supported by a judgment of the Kerala High Court.
5. The assessee argued that as long as the trust's objects were charitable, registration should not be refused, citing relevant case law and emphasizing that the trust was at an early stage.
6. The Tribunal considered precedents where registration was granted to trusts at the commencement stage, emphasizing the limited powers of the Commissioner in such cases.
7. The Tribunal also referred to a judgment of the Allahabad High Court distinguishing a case where a trust had not performed charitable work.
8. Ultimately, the Tribunal directed the Commissioner to reconsider the applications for registration under section 12AA and approval under section 80G in light of the discussion, leading to the allowance of both appeals.

This detailed analysis of the judgment highlights the key issues, arguments presented, legal principles applied, and the final decision reached by the Tribunal.